EXPLANATORY MEMORANDUM
1.CONTEXT OF THE DELEGATED ACT
On 20 May 2015, a new framework on anti-money laundering and counter-terrorist financing ("AML/CFT") was adopted. The new rules consist of:
(a) Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing ("the 4AMLD"), and
(b) Regulation (EU) 2015/847 on information accompanying transfers of funds ("FTR").
The new rules constitute a modern, coherent framework in the field, and are consistent with international standards and recommendations currently in force, mainly those issued by the Financial Action Task Force (FATF).
According to Article 9(1) of the 4AMLD, third-country jurisdictions which have strategic deficiencies in their AML/CFT regimes that pose significant threats to the financial system of the Union (‘high-risk third countries’) must be identified in order to protect the proper functioning of the internal market. Article 9(2) of the Directive empowers the Commission to adopt delegated acts in order to identify those high-risk third countries, taking into account strategic deficiencies, and laying down the criteria on which the Commission's assessment is to be based. Based on this identification, obliged entities are called by Article 18(1) of the 4AMLD to apply enhanced customer due diligence measures when establishing business relationships or carrying out transactions with natural persons or legal entities established in the listed countries.
On 14 July 2016, the European Commission adopted the Delegated Regulation (EU) 2016/1675 which identifies a number of third countries that have strategic deficiencies in their AML/CFT regimes that pose significant threats to the financial system of the Union.
The Commission is currently working towards a new methodology to identify high risk third countries that does not rely only on external information sources to identify jurisdictions presenting strategic deficiencies in tackling money laundering and financing of terrorism. This methodology will clarify the process for carrying out the assessment, the listing criteria and the follow-up procedure – including the involvement of Member States experts and engagement with the European Parliament throughout the process. The Commission will engage with the European Parliament and the Council regarding the establishment of this methodology once the listing criteria in article 9 which are currently being re-negotiated, are finalised. Pending the final outcome of the revision of article 9, the Commission is committed to consider relevant AML/CFT criteria when making its assessment based on the new methodology, including the availability and information exchange on beneficial ownership information. In line with the Roadmap that the Commission delivered to the European Parliament on 29 June 2017, the Commission expects to adopt a delegated Regulation based on the new methodology by the end of 2018.
Pending the completion of the Commission assessment under the new methodology, it is necessary to continue to update the list in order to ensure EU rules apply to third countries internationally identified as being of high risk. As stressed in Recital 28 of the 4AMLD, the changing nature of money laundering and terrorist financing threats, facilitated by a constant evolution of technology and of the means at the disposal of criminals, requires that quick and continuous adaptations of the legal framework as regards high-risk third countries be made in order to address efficiently existing risks and prevent new ones from arising. Considering the level of financial systems' integration, the internal market would be exposed to serious risks of money laundering and terrorist financing if the EU does not add high risk jurisdictions identified by FATF to the EU list. The EU AML/CFT framework would also fall short of complying with international commitments and contravene EU efforts to promote a global approach towards high risk countries.
Following a precautionary principle, in the period before assessments can be made under the new methodology, it seems appropriate to add to the list additional third countries which meet the criteria set out in article 9(2) of the 4AMLD, whilst the adaptation of the list to take account of third countries which are progressing in addressing the strategic deficiences should take place once the assessment under the new methodology is complete. Therefore the Commission did not decide at this stage to remove Guyana, Lao PDR, Afghanistan and Uganda as further assesssment needs to be made on the basis of the new methodology. In line with the precautionay principle, enhanced due diligence measures towards Guyana, Lao PDR, Afghanistan and Uganda will continue to be applied.
A. Addition to the list of high-risk third countries
The Commission took into account, as appropriate, the recent FATF Public Statements, FATF documents (Improving Global AML/CFT Compliance: on-going process), FATF reports on International Cooperation Review, and the mutual evaluations report carried out by FATF and FATF Style Regional Bodies (FSRBs) in relation to the risks posed by individual third countries in line with Article 9(4) 4AMLD. In particular, it considered the outcome of the FATF 29th Plenary meeting and the high-risk countries identified by FATF 1 . On this occasion, Sri Lanka, Trinidad and Tobago and Tunisia were identified as presenting strategic deficiencies in its AML/CFT regime.
Based on these information sources, the Commission considers that Sri Lanka, Trinidad and Tobago and Tunisia meet the criteria set in article 9(2) of the 4AMLD. Hence Sri Lanka, Trinidad and Tobago and Tunisia should be added on the list of high-risk third countries presenting strategic deficiencies in their AML/CFT regime that pose significant threats to the financial system of the Union. Therefore these countries should be included in the Delegated Act provided under article 9 of 4AMLD.
Sri Lanka, Trinidad and Tobago and Tunisia provided a written high-level political commitment to address the identified deficiencies and have developed an action plan with FATF, in view of fulfilling the requirements laid down in Directive (EU) 2015/849. The Commission welcomes this commitment and calls on these jurisdictions to complete the implementation of the action plan expeditiously and within the proposed timeframes. The implementation of the action plan will be closely monitored. In order to take into account the level of commitment that has been demonstrated by these high-risk third countries, in the context of the FATF, to correct the identified weaknesses, these third countries are listed in the corresponding section of the annex to the Delegated Act.
B. Consequence
According to article 18 of Directive (EU) 2015/849, obliged entities in all Member States will be bound to apply enhanced customer due diligence measures (ECDD) when dealing with natural persons or legal entities established in high-risk third countries as defined in Delegated Regulation (EU) 2016/1675.